Shares of telecom stocks fell sharply on Monday after investment bank Citi downgraded a major American communications company over environmental concerns.
Citi analst Michael Rollins downgraded AT&T’s stock from “buy” to “neutral” about a week after the Wall Street Journal reported the telecommunications firm was one of several linked to underground cables that contain lead shielding.
The cables were buried as part of AT&T’s build-out of the national telephone system, which started in the mid-1800s and lasted until the early 1960s. The Journal’s report said AT&T and other telecoms were aware that the leaded cables had caused environmental contamination in water and ground soil throughout the country, including Lake Tahoe in California, but failed to adequately address the issue.
The Journal conducted its own research on hundreds of miles of leaded cables in more than four dozen locations, which included contracting scuba divers to take samples from underwater lines.
In a presentation cited by the Journal, officials at AT&T said as early as 2010 that it was aware of the problematic cables, but felt it was better to leave them in place because removing them could subject workers to lead exposure and release contaminants into the environment.
“It was standard operating procedure to abandon those cables in place,” Braden Allenby, a professor at Arizona State University who once served as an environmental health and safety expert for AT&T, told the Journal in an interview.
AT&T disputes the finding of the Journal’s research, saying its journalism “conflicts not only with what independent experts and long-standing science have stated about the safety of lead-clad telecom cables but also our own testing, which we have made available to the public and shared with the Journal.”
“The scientific literature and reliable studies in the U.S. and abroad give no reason to believe that these cables pose a public health issue or a risk to workers when appropriate safety measures are in place,” an AT&T spokesperson said.
AT&T further accused the Journal of relying on “flawed” testing methodologies, and said one of the companies relied upon by the Journal to test samples had a “conflict of interest,” though the telecom didn’t specify what that conflict was.
“Any new scientific data needs to be studied further before arriving at conclusions about public health and safety related to these cables,” the company said.
The U.S. Environmental Protection Agency (EPA) does not proactively investigate underground cables for lead or other types of contaminants. On Monday, several environmental groups asked the EPA to immediately begin procedures to remove lead-contaminated cables from areas where children can access them, and to investigate the risks of underwater lines that have lead shielding.
Some of the cables laid by AT&T are now owned by other companies, due in large part to the federal government’s break-up of AT&T into standalone regional businesses in the 1980s. One such business, SBC, operates under the brand name AT&T today after merging with the remnants of the company in 2005.
Other companies, including Verizon and Lumen Technologies, now own some of the contaminated lines that were installed by AT&T decades ago. On Monday, shares of Verizon fell 7.5 percent to close at just under $31.50 for the day after Citi’s downgrade of AT&T. Shares of Lumen fell 8.1 percent to $1.70, while AT&T dropped 6.8 percent to close at just over $13.50.
AT&T, Verizon, Lumen and Frontier have lost a combined $18 billion in market capitalization since the Journal’s first story on the issue was published July 9, the newspaper reported, citing research from a pair of analysts with MoffettNathanson.